The medal was located by Canterbury's Precision Targeting Team (PTT) when they executed a search warrant at the address of an offender who was well-known to police.
The offender did not provide a legitimate reason for owning the unique and rare WW1 Anzac artefact, a police spokesperson said in a statement.
The constable who found the medal was put in contact with Medals Reunited New Zealand, a non-profit organisation run by former and retired military personnel that provides a free service to reunite lost and found medals with family members of former serving military personnel.
They found the medal was originally awarded to Henry Vincent Owen from the 1st Canterbury Infantry Battalion.
The medal was referred to as the Anzac Commemorative Medallion, or Gallipoli Medallion, and was instituted in 1967 for Australian and New Zealand personnel who participated in the Gallipoli campaign in 1915.
It is cast in bronze and depicts Private John Simpson Kirkpatrick and his donkey carrying a wounded soldier.
The artefact was safely returned to Owen's 87-year-old nephew, Dennis Owen.
Dennis happily received the medal on behalf of his family and plans to pass this special piece of family history on to Sergeant Owen's great-granddaughter, police said.